Hill focuses on D.C. IRS official

A senior IRS official coming under increasingly close scrutiny by congressional investigators was aware in 2011 that the agency was inappropriately targeting tea party groups but blamed “inconsistency” and “miscommunication” for the failure to quickly stop the practice.

Interviews conducted by the House Oversight and Government Reform Committee and reviewed by POLITICO show Holly Paz, a former Washington-based manager in the IRS tax-exempt unit, knew that a handful of groups with ties to the tea party and other conservative causes might not merit the extra scrutiny they were being given when applying for a tax exemption.

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“I did see some that were really just lobbying organizations,” she told committee staff in a recent interview.

Most of the tea party groups were seeking 501(c)(4) status, which allows them to lobby without limits.

In September 2011, Paz instructed two employees to review the groups and they told her as many as 10 “could potentially be approved at the time.” But the applications languished.

The release of the transcripts to some news outlets is likely to further fuel partisan tensions surrounding the investigation into the embattled IRS.

Republicans on the Oversight Committee say the narrative plays right into what they’ve been arguing all along: that Washington orchestrated the conservative group targeting. Democrats reject that notion and insist the practice was sparked by front-line employees at an IRS outpost in Cincinnati.

“Another week, another leak from Chairman [Darrell] Issa of cherry-picked excerpts that show no White House involvement whatsoever in the identification and screening of these cases,” said Maryland Rep. Elijah Cummings, the top Democrat on the Oversight panel, in a statement to POLITICO.

Cummings spent the past week battling committee Chairman Darrell Issa, accusing the California Republican of cherry picking bits and pieces of transcripts for release to support his argument.

Cummings is threatening to release the transcripts of other interviews conducted by the committee. He’s especially eager to make public an interview with a self-identified conservative IRS manager in Cincinnati who said employees there began scrutinizing tea party tax-exempt applications.

Issa has warned Cummings that a broad release of interview transcripts has the potential to hobble the committee’s probe, but Cummings contends that it’s “more reckless to leak cherry-picked excerpts that omit key details and hide the full truth.”

The transcripts — and the fact that they were chosen for release — is a clear sign that congressional staffers are turning their sights to Paz.

New leadership at the IRS installed in the wake of the scandal replaced Paz as director of the rulings and agreements division earlier this month. The IRS didn’t immediately respond to requests for comment.

A GOP staffer told POLITICO the panel members might have her return to the committee for more questions because they think some of her testimony is inconsistent with what Elizabeth Hofacre, a former Cincinnati manager involved in the scandal, told them.

Paz told the Oversight panel that despite the nickname “tea party cases,” IRS employees were instructed to review all political cases, including liberal advocacy groups.

But Hofacre told the committee she “was tasked to do tea parties” only and would throw any progressive groups into the general inventory rather than putting them aside them for extra scrutiny.

Paz is also being portrayed as a partisan, with many Republicans noting she donated $4,000 to President Barack Obama and the Democrats during the 2008 campaign.

The transcripts indicate she was aware that a Cincinnati IRS employee leaked confidential taxpayer information to ProPublica after the publication asked for a “huge” amount of information. An IRS official handed it over without realizing that about 10 forms in the stack were not yet ready for public viewing, she said.